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Fitch May Downgrade U.S. Credit Rating

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LONDON (AP) — The United States could lose its top credit rating for the second time from a leading credit agency if there’s a delay in raising the country’s debt ceiling, Fitch Ratings warned Tuesday.

Congress has to increase the country’s debt limit, which effectively rules how much debt the U.S. can have, by March 1 or face a potential default. There are fears that the debate will deteriorate into the squabbling and political brinkmanship that marked the last effort to raise the ceiling in the summer of 2011. The U.S. Treasury Department warned then that it had nearly reached a point where it would be unable “to meet our commitments securely.”

If Fitch does move to downgrade the US, it will join Standard & Poor’s, which was so concerned by the dysfunctional 2011 debate that it stripped the U.S. of its triple A rating for the first time in the country’s history. Another major ratings agency, Moody’s, also has a negative view on the U.S. outlook.

“The pressure on the U.S. rating, if anything, is increasing,” David Riley, managing director of Fitch Ratings’ global sovereigns division said at a London conference. “We thought the 2011 crisis was a one-off event …. if we have a repeat we will place the U.S. rating under review.”

If that happens, Riley said there was “a material risk” of the rating coming down.

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Moody’s Warns of Credit Downgrade if Congress Doesn’t Address Deficit

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Moody’s Investors Service announced Thursday that a compromise to avoid the “fiscal cliff” is not enough to protect the nation’s AAA rating, calling for further action from policymakers.

It said a deal over raising the debt limit, which could include new spending cuts, tax hikes and entitlement reforms, could determine whether the nation’s credit rating is downgraded.

“The debt trajectory resulting from this process is likely to determine whether the Aaa rating is returned to a stable outlook or downgraded to Aa1,” the agency said.

The Treasury Department said the U.S. reached its $16.4 trillion debt limit on Dec. 31, but that extraordinary measures can be taken for roughly the next two months to keep paying the nation’s bills.

The credit rater said the deal hammered out by Congress and the White House on taxes is merely a first step, and the U.S.’s credit rating could be affected “negatively” if Washington fails to take further steps to rein in the deficit. In fact, it said it was “necessary” for policymakers to adopt further measures to bring down the deficit to keep the U.S. rating intact.

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